Since financial services are linked to and reflective of the real economy, the slowdown in economic growth is impacting this sector also.

Ajay Srinivasan, CEO, financial services, Aditya Birla Group, in an interaction with Ira Dugal, says that structurally India is still a big market given its demography and savings rate.

The market sentiment seems to be improving…

I think the sentiment in the economy has improved with the way the rupee has stabilised as a result of the capital flows that have come in. The recent estimates of the CAD have been better than the $70 billion estimated earlier. Globally, the delay in Fed tapering and better numbers from China have improved capital flows into the financial markets and have taken the stock market higher. But I think improvement in economic growth per se is still some distance away and the challenges of inflation and employment remain.

So, do you feel the fears of capital outflows have eased?

I think those have partly eased because of what happened with the currency and the external account since all countries with high CAD were thought to be at higher risk. But they have also partly eased because of the delay in Fed tapering. Expectations are that tapering might be pushed back further. Therefore, global liquidity is still benign. So, I believe, it’s a combination of global liquidity and domestic factors that have helped. We must be clear, though, that this is a window which is open till tapering actually starts and that we will have to set things in order by then.

But the growth and, hence, the demand picture hasn’t changed. Has it?

No, it hasn’t. I think we will have some benefit this year from better agriculture, but both industry and services continue to slow down. If you look at it from the demand side, consumption demand is hurting because of inflation and high interest rates. At the same time, investment demand is hurting because of general sentiment, the policy framework and the relatively high interest rates. So, in that sense, growth has not come back yet.

Having said that, there have been positive developments. For instance, the CCI clearing stalled projects is an important move. The question is, once these projects are cleared, how do you make sure they get off the ground. If that happens, you will start to derive ancillary benefits and it will have a multiplier effect.